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Choosing fair lotteries to defeat the competition

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  • Liad Wagman
  • Vincent Conitzer

Abstract

We study the following game: each agent i chooses a lottery over nonnegative numbers whose expectation is equal to his budget b_i. The agent with the highest realized outcome wins and agents only care about winning). This game is motivated by various real-world settings where agents each choose a gamble and the primary goal is to come out ahead. Such settings include patent races, stock market competitions, and R&D tournaments. We show that there is a unique symmetric equilibrium when budgets are equal. We proceed to study and solve extensions, including settings where agents must obtain a minimum outcome to win; where agents choose their budgets (at a cost); and where budgets are private information.
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Suggested Citation

  • Liad Wagman & Vincent Conitzer, 2012. "Choosing fair lotteries to defeat the competition," International Journal of Game Theory, Springer;Game Theory Society, vol. 41(1), pages 91-129, February.
    • Handle: RePEc:spr:jogath:v:41:y:2012:i:1:p:91-129
    DOI: 10.1007/s00182-011-0275-9
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    Cited by:

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    3. Ralph Boleslavsky & Christopher Cotton, 2011. "Learning More by Doing Less," Working Papers 2011-6, University of Miami, Department of Economics.
    4. Boleslavsky, Raphael & Cotton, Christopher, 2012. "Grade Inflation and Education Quality," MPRA Paper 66119, University Library of Munich, Germany.
    5. Mark Whitmeyer, 2021. "Submission Fees in Risk-Taking Contests," Papers 2108.13506, arXiv.org.

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    More about this item

    Keywords

    Strategic gambling; Nash equilibrium; Fair lotteries; C70; C72; D81; L20;
    All these keywords.

    JEL classification:

    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
    • L20 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - General
    • C70 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - General
    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games

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